New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $800,000, and it would cost another $20,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $489,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $14,500. The sprayer would not change revenues, but it is expected to save the firm $390,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. What is the Year-0 net cash flow? b. What are the net operating cash flows in Years 1, 2, and 3? Year 1:$ Year 2:$ Year 3:$ c. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)? d. If the project's cost of capital is 15%, what is the NPV of the project? $ New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $800,000, and it would cost another $20,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $489,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $14,500. The sprayer would not change revenues, but it is expected to save the firm $390,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. What is the Year-0 net cash flow? b. What are the net operating cash flows in Years 1, 2, and 3? Year 1:$ Year 2:$ Year 3:$ c. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)? d. If the project's cost of capital is 15%, what is the NPV of the project? $
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
Pristine Thread Co. encountered a fire on March 12 where some of the inventory was destroyed. A physical count of inventory after the fire shows $56,000 still on hand. The company also had beginning...
-
Find RAB in the network in figure. 4K2S RAD
-
Keystone Enterprises just announced record 2008 EPS of \($5.00\), up \($0.25\) from last year. This is the 10th consecutive year that the company has increased its EPS, an enviable record. Unfortu-...
-
How does activity-based costing (ABC) differ from the traditional approach? What is the underlying difference between their philosophies? (R-1)
-
A firm has the following items on its balance sheet: Cash ........................$ 20,000,000 Inventory ...................... 134,000,000 Notes payable to bank ................ 31,500,000 Common...
-
8 Portia Incorporated is a retailer of scrapbooking products. The actual and forecast sales for the months of April through August are: 0 2 : 1 5 : 1 6 \ table [ [ , ] , [ April ( actual ) , Revenues...
-
Take me to the textBonus Company had the following amounts in its statement of cashflows for the year ended December 31, 2019.Net decrease in cash from operating activities $94,000Net decrease in 2...
-
_____ are a kind of hybrid between traditional fee-forservice plans and HMOs.
-
_____ is a measure of how often claims are made against an insurance policy.
-
_____ provide reinforcement for actions of more than one individual within the organization.
-
In the liabilities section of its 2008 balance sheet, Wells Fargo & Company reported "noninterestbearing deposits" of over \(\$ 150\) billion. Wells Fargo is a very large banking company. In the...
-
If you were a compensation consultant to a company, how would you recommend it provide incentives to the CE O and other executives? Why?
-
A firm is expected to have earnings next year of $5.27 per share and the firm is expected to pay a dividend of $2.7. Investors' required rate of return is 8%. If the sustainable growth rate is 4.5%,...
-
1. What are some current issues facing Saudi Arabia? What is the climate for doing business in Saudi Arabia today? 2. Is it legal for Auger's firm to make a payment of $100,000 to help ensure this...
-
A firm is earning $8 per year. It can earn .20 (after corporate tax) on reinvested funds. Based on a constant dividend the firm's value is $40.27. If the funds are reinvested the firm's value after...
-
What does the practice and theory of international audit include aside from knowledge of ISAs?
-
Evaluate this quote: Every international business, large or small, should have an annual audit by an independent auditor. Why must an auditor review the financial statements of a company each year?
Study smarter with the SolutionInn App